Are your customers ready to bank by smartwatch?

Smart wearable devices have been on the rise in recent years. While only some banking functions may translate to these tiny, albeit advanced, devices, some community banks have already made the jump to the smartwatch.

By Katie Kuehner-Hebert

More and more people are using smartwatches for everyday tasks while on the go, but how many do their banking on them? Smartwatches, from tech-heavy wearables like the Apple Watch and Samsung Galaxy Watch to activity trackers from Fitbit, offer community banks opportunities to reach their customers wherever they are. However, only a portion of them have embraced this category of technology.

Smartwatches, while aggressively growing in popularity, are still “in a very nascent phase” in terms of maximizing consumer utility, says Daniel Haisley, executive vice president of product at Apiture, a digital banking solutions provider in Wilmington, N.C.

In an effort to get feedback from users to define the direction of the market, he adds, financial institutions are “dipping their toes” into this new channel with basic functionality like viewing accounts, checking balances and making point-of-sale payments.

“Every touchpoint is an opportunity for the financial institution to deepen its client relationships,” Haisley says. “Brands are fighting tooth and nail for user attention, so every chance to add value to users must be maximized.”

A smartwatch’s value increases once application developers can marry the superset of data it holds that may not be finance-related but can be used to solve financial problems, Haisley says. Health statistics, accelerometer data, location and other data on a smartwatch can all be compiled “to create unique experiences that add tangible value to users,” he adds.

So, what benefits does smartwatch banking offer community banks? Most community banks likely won’t charge their customers for these services, so success will be measured in increased brand affinity, client retention, adoption and “the downstream value of the relationship in its entirety,” Haisley says.

Is integrating a smartwatch app or feature easy for community banks that already have a mobile app or digital presence? It depends on their service provider, Haisley says.

“Most financial institutions—particularly community banks, credit unions and other smaller institutions—tend to partner with technology service firms to provide these types of features, as opposed to building internally,” he says. “So, if they’ve picked their partners well, yes, there should be a clear, easy path to market in the smartwatch application space.”

An early smartwatch adopter

OceanFirst Bank was an early adopter (see sidebar below), joining a smartwatch beta group with its digital service provider at the end of 2015, says David Howard, president of digital strategy and innovation at the $8 billion-asset community bank in Red Bank, N.J. “As OceanFirst focuses on delivering service where and when the customer wants, it is critical that we enable our customers to use emerging technology,” he says.

“As [we focus] on delivering service where and when the customer wants, it is critical that we enable our customers to use emerging technology.”
—David Howard, OceanFirst Bank

The Quick Balance feature within OceanFirst’s banking app allows customers to access balance information on their supported mobile phones or smartwatches, Howard says. The feature reduces friction by allowing customers access to the information they need quickly.

Strong relationships are built on trust, he adds, so OceanFirst provides its customers with a Zero Liability Policy, meaning that their digital information and transactions are as safe as the cash in the bank’s vault. “At OceanFirst, we believe that, ideally, banking services remain nearly invisible and support the customer by providing services when and where they want them and that are safe, reliable and accurate,” Howard adds.

As branch traffic declines and digital banking expands, any way that a community bank can engage its account holders is “a win-win,” says Allan Brown, vice president and general manager of U.S. digital community markets at Finastra, a core provider that bought mobile and internet banking solutions developer Malauzai in 2018. Malauzai was an early provider of smartwatch banking capabilities.

“A wearable app can be a great way to easily check balances on the go,” Brown says. “We know from Malauzai’s Monkey Insights that 63% of digital activity is checking balances and transaction history. However, it is important to note that wearable banking is still not widely adopted.”

Only about 1% of registered banking users actually used their smartwatches within a 90-day period, according to a recent Monkey Insights study.

“Proprietary Finastra data suggests users prefer to use larger devices for operations that require more complexity or involve larger quantities of money,” he says.

Happy State Bank in Happy, Texas, was also one of the first community banks to offer a smartwatch banking app through its digital banking vendor. Its app allowed customers to view their account balances, transaction history and nearby branches. But usage on smartwatches was “incredibly low,” so the $3.5 billion-asset community bank stopped offering the app. “We found most people just used their phone for these services,” says Rian Clinton, president of virtual banking at Happy State Bank.

The bank still encourages its customers to use their smartwatches to make purchases at retail outlets, grocery stores and other merchants by tapping them on point-of-sale terminals, Clinton says.

“We hear stories quite often of customers that go running or go to the gym and forget they need gas,” he says. “Luckily they have their smartwatch on, and they are able to pay quickly and go right into their workout.”

“Money matters, and if we can keep a customer connected with their money and our services, then we are deepening the relationship.”
—Rian Clinton, Happy State Bank

For Happy State Bank, the “value add” is being more connected to customers. “Money matters, and if we can keep a customer connected with their money and our services, then we are deepening the relationship,” Clinton says. He expects useful features will increase when artificial intelligence is incorporated into smartwatches. Community banks like Happy State Bank will jump on these opportunities when they arise.

OceanFirst Bank customers can monitor their accounts and recent transactions and even find nearby ATMs or branches via the bank’s smartwatch application.

How OceanFirst customers bank by smartwatch

On the smartwatch banking app of OceanFirst Bank in Red Bank, N.J., many everyday digital banking features are available.

Customers using its mobile app can turn on a Quick Balance feature and specify which accounts and the order of accounts to display, says David Howard, the bank’s president of digital strategy and innovation. They can tap to view the last five transactions on a specific account and quickly answer the most common questions, such as how much they can spend right now, whether their last purchase is reflected in their account and if their paycheck was deposited. Customers can also locate the branch or ATM closest to them. Moreover, they can use their smartwatch to pay for purchases at retail stores by tapping it on contactless-equipped credit card terminals at checkout.

“More advanced digital banking functions, like bill pay, personal financial management, card control or access to our Nest Egg investment platform are best accessed through a phone, tablet or computer,” Howard says. “As user interfaces continue to improve at a rapid pace, we would not be surprised to see more and more smartwatch functionality coming over time.”

When launching the smartwatch banking app, the greatest challenge was employee education early on, when fewer employees owned smartwatches, he says.

“At OceanFirst, we invested in demo technology and created digital champions in the customer care center and our branches to bridge that gap,” Howard says, adding that the education is now standard as part of its Certified Digital Banker program.

From a marketing perspective, he says it’s important to be able to mirror the standard services offered by the larger banks. “Developing a strategy that ensures OceanFirst has comparable services and that our employees are well-versed in using the technology and can offer local hands-on assistance to customers is what helps set us apart from our peers,” he adds.

Katie Kuehner-Hebert is a writer in California.